Gigaom reports that there is a new class action suit against Yelp for security law violations:
The complaint alleges Yelp violated securities law by committing “fraud on the market,” and claims that executive sold stock when the price was near a high of almost $90 in February; the price fell sharply shortly after this in light of the negative publicity surrounding the FTC complaints.
This suit, rather than attacking Yelp’s practices directly are alleging that Yelp made “false and misleading statements about their true business and financial condition” in regards to the “robustness of their algorithms designed to screen reviews” and the Company’s growth prospects and the “extent to which they were reliant upon undisclosed business practices”.
From the filing:
(a) Reviews, including anonymous reviews, appearing on the Company’s website were not all authentic “firsthand” reviews, but instead included fraudulent reviews by reviewers who did not have first-hand experience with the business being reviewed;
(b) Algorithms purportedly designed to screen unreliable reviews did not comprehensively do so, and instead, the Company allowed such unreliable reviews to remain prominent while the Company tried to sell services designed to suppress negative reviews or make them go away; and
(c) In light of the above facts, the representations concerning the Company’s current and future financial condition and prospects, and the extent to which they were reliant upon undisclosed business practices, did not have a reasonable basis.
It will be interesting to see if these new angles of “attack” on Yelp are any more successful than previous suits.
Here is the complete filing for Curry vs Yelp.
Yelp Being Sued in San Francisco Courts for Misleading Investors by Mike Blumenthal